Are ETFs a house of cards?

Barry_Bear

Alexland, very useful link!

Alexland

Barry_Bear said:

Alexland, very useful link!

And now you understand the process you can see how misleading that article was to suggest that APs can just create ETF units (when they are actually asking the ETF manager to create units in exchange for providing securities) as it gives the impression that there are long term investors holding ETF units for which there are no underlying assets which isn't true where the ETF has physical replication.

Now if you hold a synthetic replication ETF there are lots more things to worry about!

Albermarle

Difficult to avoid ETF's if you have funds from the likes of Vanguard.

Of course I understand that but that is different from buying a portfolio of them directly. I am sure most ETF's are fine but just not for me as a direct investment, rightly or wrongly .

Thrugelmir

Zorillo said:

Thrugelmir said:

Hardly new news. The risks have always existed. 

Nothing is news to people who already know it, but it can be quite useful to people who don't.  Especially  people who might be drawn  in by "capped fees" and "real-time pricing" and think they are preferable to OEICs or ITs as a result. 

Surprising how many people that DIY do not actually understand what they are investing in. More focussed (for example) on reducing fees in the hope they will it generate better returns than learning about investing itself. Gilts and other fixed interest stocks are very simple yet so often misunderstood.

Thrugelmir

Barry_Bear said:

So with that Vanguard fund, which is a fund, not an ETF, there is still exposure to ETF risk.

The Lifestrategy funds are among the most popular funds for retirement planning for retail investors.

An equity is an equity. Simply a listed investment. They are far from being identical. Which makes some not suitable for inexperienced investors. 

cloud_dog

Thrugelmir said:

Surprising how many people that DIY do not actually understand what they are investing in. 

Interestingly, even though I consider my self an experienced investor (don't confuse 'experienced' with good), I have historically shied away from ETFs for precisely this reason.  I do hold ETFs (well two) but I think I understand those 

Thrugelmir

cloud_dog said:

Thrugelmir said:

Surprising how many people that DIY do not actually understand what they are investing in. 

Interestingly, even though I consider my self an experienced investor (don't confuse 'experienced' with good), I have historically shied away from ETFs for precisely this reason.  I do hold ETFs (well two) but I think I understand those 

Making errors of judgement is how one gains experience.